Home ownership in key global cities is so far out of reach of most people that Cape Town – even with its rocketing house-price growth in recent years – is regarded as having among the most affordable housing in the world.
This is a magnet for foreign buyers who also love the city’s weather, lifestyle offerings and natural beauty. Three key factors, including house price to income ratio, rent as a proportion of income, and real house price growth compared to real income growth, were analysed when reaching this conclusion.
The inaugural edition of Knight Frank’s Urban Futures report – which includes its Global Affordability Monitor that analyses affordability across 32 cities – puts the Mother City in a list of cities with the world’s second most affordable housing, along with Brussels, Madrid, Miami, Moscow, Mumbai, Paris and Stockholm.
This is despite the fact that, over the past five years to September 2018, house prices in Cape Town rose by 22.5% while real household income dropped by 6.2%, leaving an affordability gap of 28.7%.
Compared to other key cities, however, this gap is not too bad, with the report revealing that Amsterdam, Vancouver and Auckland saw real house price growth outstrip real income growth by 59%, 46% and 32% respectively, making these cities some of the least affordable in the world.
Richard Hardie, chief executive of Knight Frank South Africa, says: “Cape Town has certainly ended up on the global map when you consider lifestyle, affordability and the ease to purchase in South Africa for foreigners.
“As with many of these key cities, there is a great deal of private wealth in South Africa. Much of this wealth finds its way into residential property in Cape Town, either as a home, family home while the bread winner commutes to Joburg or as a holiday home.”
The internationals (swallows) also treat it as home for three to four months of the year, he says. Furthermore, the Western Cape has seen off water shortages and has “excellent infrastructure” that is constantly being improved, says Mike Greeff, chief executive of Greeff Christie’s International Real Estate.
“Towards the end of 2018, Cape Town was also named the ‘Greatest City in the World’ according to a poll conducted by The Telegraph, and this additional endorsement will also greatly increase interest in the Mother City. A further knock-on effect is that tourism is also expected to increase this year.”
Greeff says Cape Town has a well-established reputation for being a tourist favourite and regularly tops international destination lists for places to visit. The city is hugely popular for its lifestyle appeal and world-class amenities.
“Property in the area is increasingly sought-after for its convenience and access to work nodes. Cape Town is also unique in its ability to foster work and lifestyle destinations within close proximity of each other. This makes it almost effortless for individuals to transition between work and personal life.”